Forum Post: Progressive taxation of DIVIDENDS paid to shareholders
Posted 13 years ago on Oct. 26, 2011, 8:51 p.m. EST by TaxDividends
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The corporations have owners. The owners are the shareholders. When the corporation makes a profit in the quarter, the shareholders are paid DIVIDENDS.
The payment of dividends should be subject to heavy progressive taxation. The bigger is the payment, the bigger the tax.
Quarterly payments of dividends of more than 500 thousand dollars should be taxed at 70% in every transaction.
This would cause everyone (anyone who mattered, anyway) to pull their money out of the stock market causing it to tank. Then, corporations won't be able to fund investment because the cost of capital will be far too high. This would effectively establish a huge barrier between those who have capital and those who have innovative ideas about how to use capital. How is that helpful? Do you just want to punish rich people? If you're going to harm them out of spite, why not just set fire to their houses? Or maybe kill their pets. Maybe that would make you feel better.
No. Because "everyone" don't have 500 thousand dollars of dividends to be paid every quarter. The "small investor" is paid waaaaay less than 500 thousand dollars per quarter. And most of the small investors are not interested in dividends, but in buying stocks to sell it latter. No reason to pull their money out of the stock market.
Companies would just stop paying dividends. They can return the money to the shareholders via stock buybacks and simply avoid the tax.
Dividends should be taxed at one's normal income rate, not more, not less.
Who cares if anyone with less than 500k in dividend payments pulls their money out or not? If all we're left with is small investors invested in the stock market we're screwed. We ALL depend on large companies to employ us and build the products that we use every day. Destroying them doesn't help anyone. I don't understand what you think the effect of this tax would be. How does this encourage behavior that we want?
Time to tax the owners of the corporations, the big shareholders.
Where do you think most people and, for example, union pension plans, have their retirement money and savings? How do you think that losses to such a tax would be made up? Why wouldn't a company not then just change it's dividend approach?
Seriously, did none you guys ever take any business/econ/personal finance classes? I see some of most fundamentally dumb ideas around here. lol
Soooooo simple: pension plans would be exempt from that tax. What's the difficult here?
"Why wouldn't a company not then just change it's dividend approach?" How? Stopping to pay dividends? The billionaires who earn hundreds of millions of dollars in dividends every quarter will not be happy...
And you think they'll be happy with the tax? LOL! Any investor worth their salt isn't going to take a 70% hit on their investment return. They'll just find a different investment vehicle. As a rule you only want to tax things that you want to discourage. How does taxing dividends help ANYONE?
The multimillionaires and the billionaires CAN'T find a different investment vehicle. Almost all their fortune is due to their big stake in corporations. They own A LOT of shares, and they don't plan to sell their enormous stakes in the companies where they are top shareholders.
If the government taxes the big payments of dividends, it will be collecting A LOT of money, and directly from the big rich crooks who are the real bosses of the corporations.
They will certainly sell if that stock becomes, in their opinion, overpriced. That is the whole point of buy low, sell high.
I can think of about a million different instruments that don't have dividends.
Corporate bonds, ETFs, Municipal Bonds, CoDs, Spot securities, Real Estate, Venture funds... the list goes on and on....
No one is going to just put up their money for free.
Exactly. The typical static thinking with little understanding of how what they want to affect actually works and what the effects would be.
Sorry, you can't have a market where one participant is paying no tax and another is paying 70%. That doesn't work.
You appear not to understand that all companies don't pay dividends. Those that do can very easily change their approach to cash distribution, which many do at various times. Instead of returning cash to stockholders, they can use the cash internally, buy back their stock, buy other assets and/or other companies, etc., all of which will generally increase the value of the stock in about the same amount (or more in some cases since cash can be leveraged) in lieu of paying a dividend.